(For full election coverage click on [nN24156842])
* Argentine president loses lower house majority
* Ex-president Nestor Kirchner upset in key race
* Government source says cabinet shuffle coming (Adds cabinet changes comment, 4th paragraph)
By Kevin Gray
BUENOS AIRES, June 29 (Reuters) - Argentine President Cristina Fernandez suffered a stinging blow in Sunday’s mid-term, losing her majority in the lower house as voters rejected her combative politics and handling of an economic slowdown.
In a humiliating defeat for Argentina’s first couple, her powerful husband and predecessor, former President Nestor Kirchner, was upset in a high-profile congressional race.
The result heightened political uncertainties in Latin America’s No. 3 economy, potentially setting off a power struggle in the ruling Peronist party. [ID:nN29357339]
Fernandez could replace several cabinet ministers in the wake of the defeat, a government source told reporters, asking not to be named.
A slate of candidates headed by billionaire businessman Francisco de Narvaez took just 2 percentage points more votes than the slate headed by Kirchner, in a closely watched race in the country’s most populous province, Buenos Aires.
“This is a stunning result,” said Federico Thomsen, an Argentine political and economic analyst. “Kirchner put everything he had in this election, he put himself in the battlefront and it still wasn’t enough.”
The mid-term election was widely seen as a referendum on the Kirchners, and the former president had hoped to shore flagging support for his wife by winning the province, a crucial electoral battleground and Peronist stronghold.
Kirchner conceded to De Narvaez, a 55-year-old center-right congressman. They are both from different wings of the Peronist party.
“At the end of the night triumph awaits us,” De Narvaez told supporters earlier at his election night headquarters.
Fernandez’s approval ratings are mired at 30 percent as she struggles with high inflation, complaints about growing crime and a long-running battle with farmers over her export taxes.
In the lower house, opposition parties took more than a dozen seats, rolling back Fernandez’s previous majority when her allies had more than half of the chamber.
The president was also very close to losing her majority in the Senate, according to preliminary official results.
Kirchner may have to shelve plans he is widely believed to have to run again for president in 2011 since he cannot use a victory in Buenos Aires province as a springboard.
De Narvaez, who owns a television station and other businesses, spent millions of dollars of his own money to fund his campaign, vowing to put the Kirchners’ power in check and reduce crime. [ID:nN29340415]
Some voters, like Violeta Canosa, a 48-year-old housewife, said they threw their support behind de Narvaez to express discontent with the Kirchners.
“They always seem angry and are authoritarian,” she said. “For them, you are either with them or against them.”
Losses by allies in other leading provinces also reflected the Kirchners’ diminished popularity, including rural provinces like Cordoba and Santa Fe where they are unpopular because of a lengthy standoff with farmers.
In another setback, candidates backed by the government finished second in the Kirchners’ home province of Santa Cruz.
Under Argentina’s proportional voting system, voters cast ballots for party slates, so even though he came in second, Kirchner won a seat in Congress.
Many investors put projects on hold and the peso currency weakened in the run up to the election, due to uncertainty over where government policy would head after the vote, since the new Congress will not be seated until December.
Kirchner left office in 2007 as a popular leader, credited by many Argentines for steering the country’s remarkable recovery. But since then, he and his wife’s popularity has plummeted.
Fernandez moved up the mid-term election by four months — they were scheduled for October — in a bid to get them out of the way before the economic crisis worsened.
Although official figures show the economy is still growing slowly, the data is widely questioned. Most private estimates forecast an economic contraction this year, with unemployment rising as car, steel and construction output slump. (Additional reporting by Helen Popper and Fiona Ortiz, editing by Anthony Boadle)